1️⃣ Cash Position & Liquidity Buffer
Start by checking available cash and short-term investments.
Strong cash levels act as a buffer for daily operations and near-term liabilities.
2️⃣ Asset Mix: Current vs. Long-Term
Compare how much is tied up in current vs. non-current assets.
A limited portion of liquid assets could point to short-term strain.
3️⃣ Receivables & Collection Health
Rising receivables or slower collections may hint at trouble.
Measure Days Sales Outstanding (DSO) and compare to benchmarks.
4️⃣ Inventory & Operational Discipline
Too much inventory? You might be overproducing.
Too little? You could face stockouts.
Inventory Turnover tells the real story.
5️⃣ PP&E Investments
Increases in Property, Plant & Equipment can signal growth.
But do they match revenue trends? If not, it’s poor capital allocation.
6️⃣ Short-Term Debt Exposure
Climbing short-term debt may suggest liquidity pressure.
Stack it up against cash flow to assess sustainability.
7️⃣ Deferred Liabilities & Future Impact
Look at deferred taxes and pension obligations.
They shape future cash flow and long-term strategy.
8️⃣ Equity Moves: Issuance vs. Buybacks
Raising capital by issuing shares? That’s dilution.
Buybacks? Possibly confidence — but check how they’re funded.
9️⃣ Leverage & Debt Servicing
Use Debt-to-Equity and DSCR to evaluate leverage.
The real question: Can operations support repayment?
🔟 Retained Earnings & Financial Health
Rising retained earnings mean reinvested profit.
Negative or flat? Either poor performance — or too-aggressive dividends.
Align equity and debt with your long-term strategy.
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